Question: Wolfco (A) management is currently considering a merger with Lambco (B). Wolfco has 20 million shares outstanding, selling at a price of $30 per share.

Wolfco (A) management is currently considering a merger with Lambco (B). Wolfco has 20 million shares outstanding, selling at a price of $30 per share. Lambco has 20 million shares outstanding, selling at a price of $25 per share. Neither company has any debt.

If Wolfco and Lambco were to merge, Wolfco believes that the synergy will be $200 million. The two companies management teams are now trying to negotiate the terms of a merger.

Wolfco management offer one Wolfco share for each currently outstanding Lambco share. What is the NPV of this offer to Wolfco?

	a.	$50 million
	b.	$0 million
	c.	$66.7 million
	d.	$100 million
	e.	$650.0 million

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock blur-text-image

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!

Wolfco (A) management is currently considering a merger with Lambco (B). Wolfco has 20 million shares outstanding, selling at a price of $30 per share. Lambco has 10 million shares outstanding....

Please answer problem a),b),c),d) Thank you! Wolfco management is currently considering a merger with Lambco. Both companies are in the same industry, and both companies' shares sell at a ratio of...

Wolfco management is currently considering a merger with Lambco. Both companies are in the same industry, and both companies shares sell at a ratio of price to free cash flow of 10. If the two...

Chattingham Industries is considering the purchase of new machinery which will result in annual cost savings over its existing manufacturing operations. Currently, Chattingham has a debt-equity ratio...

Wolfco management is currently considering a merger with Lambco. Both companies are in the same industry, and both companies shares sell at a ratio of price to free cash flow of 10. If the two...

Q5. You have been asked to analyse the capit and make recommendations on a future course of action. al structure of DW ASA DW ASA million shares outstanding, selling at 20 per share and a ebt-equity...

Question 3: A company finances its operations with half debt and half common equity, earning net income of $30 million with dividend payout ratio of 20%. Its capital budget is $40 million, and the...

Gravel is being dumped from a conveyor belt at a rate of 30 ft3/min and its coarseness is such that it forms a pile in the shape of a cone whose base diameter and height are always equal. How fast is...

Calculate the coefficient of lift and coefficient of drag for the body shown below. Neglect the rear surface of the body. The chord of this body is taken to be the lower surface with a length of 1.5...

Hardware Consultants purchased a building for $445,000 and depreciated it on a straight-line basis over 40 years. The estimated residual value was $90,000. After using the building for 20 years,...

A company issues 1,050 shares of its common stock for $33,600 cash. Prepare journal entries to record this event under each of the following separate situations.